Pincher Company purchased 50 Isaac Company bonds at 13%, 10-year, $1,000 bonds on January 1,...

Question:

Pincher Company purchased 50 Isaac Company bonds at 13%, 10-year, $1,000 bonds on January 1, 2012, for $54.000 Pincher Company also had to pay $500 of broker's fees. The bonds pay interest semiannually. On January 1, 2013, after the receipt of interest, Pincher Company sold 30 of the bonds for $31,000.

Prepare the journal entries to record the transactions described above.

Journal Entries for Bond Transactions

When bonds are purchased as an investment by a Company, the Company can capitalize as an asset not only the purchase cost of the bonds but also any other costs associated with making the bond purchase (for example, including broker costs charged to execute the transaction). In the future, the bookkeeper must record an interest income being received on the bonds as the interest income is earned, plus if any part or when all of the bonds acquired are sold in the future, determine if there is any gain or loss on the sale.

Answer and Explanation:

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Debit Investment in Isaac Bonds ($54,000 + $500) = $54,500

Credit Cash $54,500

Pincher Company purchased 50 Isaac Company bonds at 13%,...

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